US natural gas futures start year lower on mild weather outlook

US natural gas futures began the year on a weak note on Friday. The market was weighed down by forecasts for warmer weather and expectations of slower demand growth.

Front-month gas futures for February delivery on the New York Mercantile Exchange were 9.6 cents, or 2.6 per cent, lower at $3.59 per million British thermal units.

The contract posted a 1.5 per cent gain in 2025, after rising over 44 per cent in 2024.

"There were concerns that the La Nina was breaking down a little bit, leading to warmer temperatures. There's also some concern internationally of LNG supplies supposedly building faster than anticipated, talk of a potential glut in the making in the international market," said Phil Flynn, senior analyst for Price Futures Group.

"The market is going to try to stabilise at this point until we get further direction of what the weather is going to be," he added.

Warmer than average temperatures

Meteorologists forecast warmer than normal temperatures nationwide through January 16, with heating degree days (HDD) falling from 413 on Wednesday to 369 on Friday. HDDs measure energy demand to heat buildings.

"With each passing day of extended warmer than normal outlooks, this market has the potential of declining further with February futures potentially sliding back to the pre-Christmas lows of about $3.47," consultancy Ritterbusch Associates said in a note.

Financial firm LSEG said average natural gas output in the lower 48 US states climbed to 110 billion cubic feet per day (bcfd) in December, surpassing November's monthly record of 109.6 bcfd.

Average gas flows to the eight large US LNG export facilities climbed to 18.5 bcfd in December, exceeding November's record of 18.2 bcfd.

LSEG also projected average gas demand in the lower 48 states, including exports, would largely be steady at 133.2 bcfd next week. This is below its Wednesday projection of 134.5 bcfd.

The US Energy Information Administration on Wednesday said energy firms withdrew 38 billion cubic feet of gas out of storage during the week ended December 26. This was below the 50-bcf withdrawal analysts forecast in a Reuters poll.

It compares with a decline of 112 bcf during the same week last year and an average withdrawal of 120 bcf over the past five years.

Meanwhile, Dutch and British wholesale gas prices rose as cooler than usual temperatures for the time of year boosted gas demand for heating.

Elsewhere, China received 22 shipments of liquefied natural gas last year from two export projects in Russia that are under sanctions from the United States and European Union, ship-tracking data showed.

(Reporting by Noel John in Bengaluru; editing by Barbara Lewis)